Factors Affecting the Profitability of Commercial Banks in Uganda: A Case Study of Stanbic Bank Uganda

Abstract

The purpose of the study was to assess the specific factors affecting the profitability of Stanbic bank Uganda as a commercial bank and to propose possible adjustments and policy reforms specifically in the banking sector that will help to stabilize this sector. The study had specific objectives of establishing the relationship of specific factors; bank size, capital ratio and deposit ratio on the Return On Assets of Stanbic Bank Uganda. The study followed a descriptive time series approach in examining the casual relationship of the stated independent variables on the dependent variable Return On Assets as a measure of bank profitability. Data used was extracted from annual financial reports of SBU for the period of 2009 to 2018. The data was captured in MS Excel and then imported to STATA 15 for analysis. Research shows that fluctuating or un increasing profitability is potentially damaging to society and the economy as a whole. Few or decreasing customer deposits indicate increased poverty among the nationals which makes planning difficult as development goals and needs of societies are not realised. If such instability persists, it may lead to bankruptcy and closure of banks which will affect the economy in the long term. The study findings revealed that bank size, capital ratio and deposit ratio have a positive relationship on Return On Assets. SBU management should increase customer deposits in order to realise and enjoy higher returns to the bank.